Research Projects

 On-Going Projects


Market Structure and Government Efficiency in Pandemics: Evidence from Nursing Home Networks, with Roland Pongou, Ghislain Junior Sidie, and  Guy Tchuente  

Abstract.  How does market structure affect the efficiency and distributional impacts of the government policy response to health crises? To address this question, we examine the long-term care market in the early period of the COVID-19 pandemic in the United States, distinguishing between for-profit (FP) and not-for-profit (NFP) nursing homes. Using unique data on the social networks of over 11,000 nursing homes in 40 states, we show that FP nursing homes incurred more deaths from COVID-19 than NFP nursing homes. For the exploration of causal mechanisms, we calibrate a two-sector continuous-time individual-based mean-field model and estimate the efficiency of public health and safety interventions (PHSIs) in curbing the spread of COVID-19. We find that PHSI efficiency interacts significantly with the ownership status of a nursing home to determine COVID-19 death among residents: a one standard deviation increase in PHSI efficiency increases the death gap between FP and NFP nursing homes by around 23 percent relative to the mean. Analyzing possible mechanisms, we show that FP nursing homes have more difficulties adapting to PHSIs. Our analysis implies that policymakers should account for both market and network structures and their heterogeneity in experiencing uncertain shocks when designing optimal targeted interventions for future pandemics.


Vaccine, Profit, and Race in a Health Crisis: Evidence from U.S. Nursing Homes, with Roland Pongou, Ghislain Junior Sidie, and  Guy Tchuente  

Abstract.  During a health crisis, how do initial mitigation policies affect the success of subsequent interventions? Using the lens of the COVID-19 pandemic in the United States, we show that the stringency of lockdown negatively affected vaccine uptake among the residents and staff of nursing homes. This negative effect was exacerbated in nursing homes with a higher share of Black residents, especially those that operate on a not-for-profit basis. The analysis sheds new light on the present-day relevance of the historical mistrust between Black populations and health authorities and how it manifests itself among the elderly across different types of care institutions.


Working and Published Papers

The Reciprocity Set, with Roland Pongou (Forthcoming at the Journal of Mathematical Economics)

Abstract. We consider the problem of designing procedures that guarantee policy stability, efficiency, and inclusiveness. For this purpose, we introduce a sequential protocol that embeds clauses granting agents the right to oppose actions not in their interest, retract actions that face opposition, and punish harmful actions. Our analysis shows that coalitional farsighted behaviors under this procedure lead to reciprocal actions. We then introduce a solution concept--the reciprocity set--to predict stable outcomes for effectivity function games. We find that under some conditions, the reciprocity set (1) is always non-empty; (2) only selects efficient outcomes; (3) strategically protects minority outcomes; and (4) is compatible with classical notions of fairness and Rawlsian justice in distributive problems.

Justice, Inclusion, and Incentives [Open Access], with Ghislain H Demeze-Jouatsa and  Roland Pongou,  Journal of Theoretical Politics, 36(2), 101-131

Abstract. How does justice affect individual incentives and efficiency in a political economy? We show that elementary principles of distributive justice guarantee the existence of a self-enforcing contract whereby agents non-cooperatively choose their inputs and derive utility from their pay. Chief among these principles is that your pay should not depend on your name, and a more productive individual should not earn less. We generalize our analysis to incorporate inclusivity, ensuring basic pay to unproductive agents, implemented through progressive taxation and redistribution. Our findings show that without redistribution, any self-enforcing agreement may be inefficient, but a minimal level of redistribution guarantees the existence of an efficient agreement. Our analysis illustrates the structure of economies and organizations in which fairness and efficiency are compatible. Furthermore, we develop an application to the formation of rent-seeking political alliances under the threat of fake news.


Robust Contracts in Common Agency, with Keler Marku, and Sergio Ocampo (Forthcoming at The Rand Journal of Economics)

Abstract.  Business activities often involve a common agent managing various projects on behalf of investors with potentially conflicting interests. The extent of the agent's actions is also often unknown to investors, who have to design contracts that provide incentives to the manager despite this lack of crucial knowledge. We consider a game between several principals and a common agent, where principals know only a subset of the actions available to the agent. Principals demand robustness and evaluate contracts on a worst-case basis. This robust approach allows for a crisp characterization of the equilibrium contracts and payoffs and provides a novel proof of equilibrium existence in common agency by constructing a pseudo-potential for the game.  Robust contracts make explicit how the efficiency of the equilibrium outcome relative to collusion among principals depends on the principals' ability to extract payments from the agent. 


Laissez-faire, Social Networks, and Race in a Pandemic, with Roland Pongou, and Guy Tchuente, AEA Papers and Proceedings, 112:325-29

Abstract. We study the effects of race, network centrality, and policies that tolerate some level of virus spread (laissez-faire) on COVID-19 deaths in nursing homes in the United States. Our analysis uses unique data on nursing home networks and calibration-based estimates of states’ preferences for health relative to short-term economic gains. Our findings suggest that laissez-faire policies increase deaths. Nursing homes with a larger share of black residents experience more deaths, but they are less vulnerable to laissez-faire policies, especially when not central in social networks. Our findings highlight significant interactions between COVID-19 policies, race, and network structure among U.S. seniors. 


Supermajority Politics: Equilibrium Range, Policy Diversity, Utilitarian Welfare, and Political Compromise, with Aseem K. Mahajan, and Roland Pongou, European Journal of Operational Research, 307 (2), 963-974

Abstract. The standard Bowen model of political competition with single-peaked preferences (Bowen, 1943) predicts party convergence to the median voter's ideal policy, with the number of equilibrium policies not exceeding two. This result assumes majority rule and a unidimensional policy space. We extend this model to static and dynamic political economies where the voting rule is a supermajority rule, and the policy space is totally ordered. We show that the exact number of equilibria in these settings is an increasing correspondence of the supermajority's size. Our findings have implications for the depth of policy diversity across structurally identical supermajoritarian political economies. We also examine the equilibrium effects of supermajority rules on utilitarian welfare and political compromise under uncertainty.


A Non-Parametric Approach to Testing the Axioms of the Shapley Value with Limited Data, with Victor Aguiar and Roland Pongou, Games and Economic Behavior, 111, 41-63 

 Abstract. The unique properties of the Shapley value–efficiency, equal treatment of identical input factors, and marginality–have made it an appealing solution concept in various classes of problems. It is however recognized that the pay schemes utilized in many real-life situations generally depart from this value. We propose a non-parametric approach to testing the empirical content of this concept with limited datasets. We introduce the Shapley distance, which, for a fixed monotone transferable-utility game, measures the distance of an arbitrary pay profile to the Shapley pay profile, and show that it is additively decomposable into the violations of the classical Shapley axioms. The analysis has several applications. In particular, it can be used to assess the extent to which an income distribution can be considered fair or unfair, and whether any particular case of unfairness is due to the violation of one or a combination of the Shapley axioms.


Optimal Interventions in Networks during  a Pandemic [Open Access], with Guy Tchuente and  Roland Pongou, Journal of Population Economics, 36 (2), 847-883

Abstract. We develop a model of optimal lockdown policy for a social planner who balances population health with short-term wealth accumulation. The unique solution depends on tolerable infection incidence and social network structure. We then use unique data on nursing home networks in the United States to calibrate the model and quantify state-level preference for prioritizing health over wealth. We also empirically validate simulation results derived from comparative statics analyses. Our findings suggest that policies that tolerate more virus spread (laissez-faire) increase state GDP growth and COVID-19 deaths in nursing homes. The detrimental effects of laissez-faire policies are more potent for nursing homes that are more peripheral in networks, nursing homes in poorer counties, and nursing homes that operate on a for-profit basis. We also find that U.S. states with Republican governors have a higher tolerable incidence level, but these policies tend to converge with a high death count.


Valuing Inputs Under Supply Uncertainty: The Bayesian Shapley Value, with Roland Pongou, Games and Economic Behavior, 108, 206-224

Abstract. We consider the problem of valuing inputs in a production environment in which the input supply is uncertain. Inputs can be workers in a firm, risk factors for a disease, securities in a financial market, or nodes in a networked economy. Each input takes its values from a finite set and uncertainty is modeled as a probability distribution over this set. First, we provide an axiomatic solution to this problem, uniquely characterizing a valuation scheme called the a priori Shapley value. Second, we solve the problem of valuing inputs a posteriori – that is, after observing output-, obtaining the Bayesian Shapley value. Third, we address the question of rationalizing uncertainty in labor supply in a non-cooperative production game where payoffs are given by the Shapley wage function. We also provide an intuitive condition for the existence of a pure-strategy Nash equilibrium. Illustrations of the theory include an application to fidelity networks.


Vaccine and Inclusion, with Zephirin Nganmeni, Roland Pongou, and Bertrand Tchantcho, Journal of Public Economic Theory, 24 (5), 1101-1123

Abstract.  In majoritarian democracies, popular policies may not be inclusive, and inclusive policies may not be popular. This dilemma raises the crucial question of when it is possible to design a policy that is both inclusive and popular. We address this question in the context of vaccine allocation in a polarized economy facing a pandemic. In such an economy, individuals are organized around distinct networks and groups and have in-group preferences. We completely characterize the set of inclusive and popular vaccine allocations. The findings imply that the number of vaccine doses necessary to generate an inclusive and popular vaccine allocation is greater than the one necessary to obtain only popular vaccine allocations. The analysis further reveals that it is always possible to design the decision-making rule of the economy to implement an inclusive and popular vaccine allocation. Under such a rule, the composition of any group endowed with the veto power should necessarily reflect the diversity of the society.


Overconfidence and Welfare in a Differentiated Duopoly, Managerial and Decision Economics, 43(3), 751-767

Abstract. We examine whether owners' decisions to delegate corporate responsibilities to overconfident managers improve welfare. We develop a dynamic model with product differentiation, where firms compete in cost-reducing research and development (R&D) and output. Before firms compete, each owner makes a strategic decision whether to hire an overconfident manager. The results reveal that when R&D technology is less productive, owners hire overconfident managers who overinvest in cost-reducing R&D. These strategic decisions improve welfare when spillovers are small and R&D productivity is low, or spillovers are large, or product differentiation is strong.


An Index of Unfairness, with Victor Aguiar, Roland Pongou, and Roberto Serrano,  in Handbook of the Shapley Value, E. Algava et al. (eds.), CRC Press Taylor and Francis, pp. 31-48

 Abstract. Aguiar et al. (2018) propose the Shapley distance as a measure of the extent to which output sharing among the stakeholders of an organization can be considered unfair. It measures the distance between an arbitrary pay profile and the Shapley pay profile under a given technology, the latter profile defining the fair distribution. We provide an axiomatic characterization of the Shapley distance and show that it can be used to determine the outcome of an underlying bargaining process. We also present applications highlighting how favoritism in income distribution, egalitarianism, and taxation violate the different ideals of justice that define the Shapley value. The analysis has implications that can be tested using real-world data sets.


On the Dynamic Analysis of Cournot-Bertrand Equilibria, with Aggey Semenov, Economics Letters, 183 (108549), 1-5

Abstract. We consider a setting where firms first invest in cost-reducing R&D. In the market stage, one firm sets a quantity, and another sets a price. We prove that the quantity-setting firm invests more in R&D, has a lower price, and produces a higher quantity than the price-setting firm. We also consider welfare implications.


Planning Projects